Mumbai: Small firms in the country are finding it difficult to comply with the stricter norms related to internal financial control in the new companies law, according to consulting firm Protiviti.
Section 134 (5) (e) of the New Companies Act requires them to confirm key requirements in relation to Internal Financial Controls Reporting (IFCR).
Some of the features of the Act include policies and procedures, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records and timely preparation of reliable financial information.
The broad nature of compliance requirements, absence of definitive guideline or framework to enable effective implementation and the fast approaching deadline of March 31 is further exacerbating the tension of the boards.
"The board of directors of listed companies are currently challenged with the compliance of Section 134 (5) (e) which requires them to confirm key requirements in relation to IFCR," managing director of Protiviti, Subrata Bagchi, told PTI on the sidelines of an event here.
Protiviti is a global consulting firm that helps companies solve problems in finance, technology, operations, governance, risk and internal audit.
"Large corporate houses like the Tatas and Birlas are already aware of the issue and they have put a proper mechanism into their system to tackle the issue. But, the problem is with small corporate houses which are yet to comply with the Act," he said, adding that the cost of compliance has gone up for the big firms, but it has also resulted in corporate frauds coming down.
Raising the demand to review the New Companies Act, President of Indian Merchant Chamber Prabodh Thakker said that they are expecting the Central Government to relook New Company's Act, 2013 and various overlapping and ambiguities built-in there. And several representations and submissions have already been provided to government on the issue.
Meanwhile, an US-based Committee of Supporting Organisations of the Treadway Commission (COSO) claimed that it can provide a solution and can bail out the companies from the problem.
"The COSO model could be considered as a suitable framework since its components, principles and points of focus addresses substantially all the requirements of Section 134 (5) (e), IFCR," COSO chairman Bob Hirth said.
